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Abbott (ABT) Q2 Earnings & Revenues Beat Estimates, Down Y/Y
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Abbott Laboratories (ABT - Free Report) reported second-quarter 2023 adjusted earnings of $1.08 per share, which topped the Zacks Consensus Estimate by 3.8%. However, the adjusted figure declined from the prior-year quarter’s levels by 24.5%. The quarter’s adjustments include 30 cents of certain non-recurring items.
GAAP EPS came in at 78 cents, which decreased 31.6% year over year.
Second-quarter worldwide sales of $9.98 billion were down 11.4% year over year on a reported basis. The top line exceeded the Zacks Consensus Estimate by 2.9%. On an organic basis (excluding the impact of foreign exchange, the Cardiovascular Systems acquisition, the impact of business exit and the impact of COVID-19 testing sales), sales rose 11.5% year over year in the reported quarter.
Q2 Results in Detail
Abbott operates through four segments — Established Pharmaceuticals, Medical Devices, Nutrition and Diagnostics.
In the second quarter, Established Pharmaceuticals’ product sales increased 5.2% on a reported basis (up 12.6% on an organic basis) to $1.29 billion. This figure compares with our model’s segmental projection of $1.18 billion for the second quarter.
Organic sales in key emerging markets improved 4.6% year over year. This was led by growth in several geographies and therapeutic areas, including gastroenterology, women's health, and central nervous system/pain management.
Abbott Laboratories Price, Consensus and EPS Surprise
The Medical Devices segment’s sales rose 13.5% year over year on a reported basis (up 14.2% on an organic basis) at $4.29 billion. This figure exceeded our segmental projection of $3.48 billion for the second quarter.
Sales growth was led by double-digit organic growth in Diabetes Care, Electrophysiology, Structural Heart and Neuromodulation. Several recently launched products and new indications contributed to the strong performance, including Amplatzer Amulet, Navitor, TriClip and Aveir.
The Diabetes Care division reported organic sales growth of 21.4% year over year, led by FreeStyle Libre, which contributed $1.3 billion in revenues in the reported quarter. Structural Heart sales rose 14.8%, and Heart Failure sales improved 9.9% year over year organically.
The Vascular division recorded organic sales growth of 5% in the quarter under review. The Electrophysiology, Rhythm Management and Neuromodulation divisions recorded organic growth of 16.9%, 8.2% and 16.2%, respectively, in the quarter under review.
Nutrition sales rose 6.3% year over year on a reported basis (up 9.9% on an organic basis) to $2.08 billion. This figure compares with our segmental projection of $1.75 billion for the second quarter.
Pediatric Nutrition sales registered 14.5% growth on an organic basis. Adult Nutrition sales improved 6% organically. Per the company, Adult Nutrition sales benefited from the strong global sales performance of Abbott's complete and balanced nutrition brand, Ensure.
Diagnostics sales were down 46% year over year on a reported basis (down 44.7% on an organic basis) to $2.32 billion. For this segment, we had projected revenues of $3.18 billion for the second quarter.
Core Laboratory Diagnostics sales were up 9.5% organically. Molecular Diagnostics declined 32.1% on an organic basis. Rapid Diagnostics sales dropped 72.3% on an organic basis, whereas Point of Care Diagnostics sales rose 2.4% organically.
Margins
The gross profit in the reported quarter fell 13.1% year over year to $5.50 billion. The gross margin contracted 111 basis points (bps) to 55.1%.
SG&A expenses were down 0.6% year over year to $2.74 billion. Research and development expenses increased 4.5% year over year to $715 million. The company reported an adjusted operating profit of $2.04 billion in the quarter under review, down 29.2% year over year. Also, the adjusted operating margin contracted 517 bps to 20.4%.
2023 Guidance
Abbott maintained its original 2023 EPS guidance, as announced on the first-quarter 2023 earnings call.
Full-year adjusted earnings (excluding specified items of $1.28 per share) are expected in the range of $4.30-$4.50 (unchanged). The Zacks Consensus Estimate for the same is pegged at $4.39.
Abbott projects full-year 2023 organic sales growth, excluding COVID-19 testing-related sales, in the low double digits (from the earlier projection of at least high single digits) and COVID-19 testing-related sales of around $1.3 billion (earlier $1.5 billion).
Our Take
Abbott exited the second quarter of 2023 with better-than-expected earnings and revenues. However, the quarter’s earnings and revenues declined year over year. On a positive note, the company delivered strong growth across its underlying base business.
The Diabetes Care business continued to benefit from the growing sales of its flagship, sensor-based continuous glucose monitoring system, FreeStyle Libre. Last month, Abbott’s FreeStyle Libre 2 system marked the first and only continuous glucose monitoring system to receive expanded national reimbursement in France, which will now include all people with diabetes who use insulin.
Within Medical Device, the company registered double-digit organic growth in Diabetes Care, Electrophysiology, Structural Heart and Neuromodulation in the reported quarter. Abbott’s highly-productive pipeline is likely to position well for its growth in the future.
Meanwhile, a significant year-over-year decline in COVID-19 testing-related sales negatively impacted the quarter’s top line.
Zacks Rank and Other Key Picks
Abbott currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader medical space that have announced quarterly results are Penumbra (PEN - Free Report) , Zimmer Biomet (ZBH - Free Report) and McKesson (MCK - Free Report) .
Penumbra, carrying a Zacks Rank #2, reported a first-quarter 2023 adjusted EPS of 23 cents, beating the Zacks Consensus Estimate by 109.1%. Revenues of $241 million outpaced the consensus estimate by 4.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Penumbra has an estimated earnings growth rate of 64.1% for the next year. PEN’s earnings surpassed estimates in all of the trailing four quarters, the average being 109.4%.
Zimmer Biomet, carrying a Zacks Rank #2, reported a first-quarter 2023 adjusted EPS of $1.89, which beat the Zacks Consensus Estimate by 13.9%. Revenues of $1.83 billion outpaced the consensus estimate by 7.4%.
Zimmer Biomet has an earnings yield of 5.29% against the industry’s -3.20%. ZBH’s earnings surpassed estimates in all the trailing four quarters, the average being 7.4%.
McKesson reported fourth-quarter fiscal 2023 adjusted earnings of $7.19 per share, which beat the Zacks Consensus Estimate by 0.4%. Revenues of $68.91 billion surpassed the Zacks Consensus Estimate by 1.1%. It currently has a Zacks Rank #2.
McKesson has an estimated earnings growth rate of 14.3% for the next year. MCK’s earnings surpassed estimates in three of the trailing four quarters and matched the same in one, the average surprise being 4.5%.
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Abbott (ABT) Q2 Earnings & Revenues Beat Estimates, Down Y/Y
Abbott Laboratories (ABT - Free Report) reported second-quarter 2023 adjusted earnings of $1.08 per share, which topped the Zacks Consensus Estimate by 3.8%. However, the adjusted figure declined from the prior-year quarter’s levels by 24.5%. The quarter’s adjustments include 30 cents of certain non-recurring items.
GAAP EPS came in at 78 cents, which decreased 31.6% year over year.
Second-quarter worldwide sales of $9.98 billion were down 11.4% year over year on a reported basis. The top line exceeded the Zacks Consensus Estimate by 2.9%. On an organic basis (excluding the impact of foreign exchange, the Cardiovascular Systems acquisition, the impact of business exit and the impact of COVID-19 testing sales), sales rose 11.5% year over year in the reported quarter.
Q2 Results in Detail
Abbott operates through four segments — Established Pharmaceuticals, Medical Devices, Nutrition and Diagnostics.
In the second quarter, Established Pharmaceuticals’ product sales increased 5.2% on a reported basis (up 12.6% on an organic basis) to $1.29 billion. This figure compares with our model’s segmental projection of $1.18 billion for the second quarter.
Organic sales in key emerging markets improved 4.6% year over year. This was led by growth in several geographies and therapeutic areas, including gastroenterology, women's health, and central nervous system/pain management.
Abbott Laboratories Price, Consensus and EPS Surprise
Abbott Laboratories price-consensus-eps-surprise-chart | Abbott Laboratories Quote
The Medical Devices segment’s sales rose 13.5% year over year on a reported basis (up 14.2% on an organic basis) at $4.29 billion. This figure exceeded our segmental projection of $3.48 billion for the second quarter.
Sales growth was led by double-digit organic growth in Diabetes Care, Electrophysiology, Structural Heart and Neuromodulation. Several recently launched products and new indications contributed to the strong performance, including Amplatzer Amulet, Navitor, TriClip and Aveir.
The Diabetes Care division reported organic sales growth of 21.4% year over year, led by FreeStyle Libre, which contributed $1.3 billion in revenues in the reported quarter. Structural Heart sales rose 14.8%, and Heart Failure sales improved 9.9% year over year organically.
The Vascular division recorded organic sales growth of 5% in the quarter under review. The Electrophysiology, Rhythm Management and Neuromodulation divisions recorded organic growth of 16.9%, 8.2% and 16.2%, respectively, in the quarter under review.
Nutrition sales rose 6.3% year over year on a reported basis (up 9.9% on an organic basis) to $2.08 billion. This figure compares with our segmental projection of $1.75 billion for the second quarter.
Pediatric Nutrition sales registered 14.5% growth on an organic basis. Adult Nutrition sales improved 6% organically. Per the company, Adult Nutrition sales benefited from the strong global sales performance of Abbott's complete and balanced nutrition brand, Ensure.
Diagnostics sales were down 46% year over year on a reported basis (down 44.7% on an organic basis) to $2.32 billion. For this segment, we had projected revenues of $3.18 billion for the second quarter.
Core Laboratory Diagnostics sales were up 9.5% organically. Molecular Diagnostics declined 32.1% on an organic basis. Rapid Diagnostics sales dropped 72.3% on an organic basis, whereas Point of Care Diagnostics sales rose 2.4% organically.
Margins
The gross profit in the reported quarter fell 13.1% year over year to $5.50 billion. The gross margin contracted 111 basis points (bps) to 55.1%.
SG&A expenses were down 0.6% year over year to $2.74 billion. Research and development expenses increased 4.5% year over year to $715 million. The company reported an adjusted operating profit of $2.04 billion in the quarter under review, down 29.2% year over year. Also, the adjusted operating margin contracted 517 bps to 20.4%.
2023 Guidance
Abbott maintained its original 2023 EPS guidance, as announced on the first-quarter 2023 earnings call.
Full-year adjusted earnings (excluding specified items of $1.28 per share) are expected in the range of $4.30-$4.50 (unchanged). The Zacks Consensus Estimate for the same is pegged at $4.39.
Abbott projects full-year 2023 organic sales growth, excluding COVID-19 testing-related sales, in the low double digits (from the earlier projection of at least high single digits) and COVID-19 testing-related sales of around $1.3 billion (earlier $1.5 billion).
Our Take
Abbott exited the second quarter of 2023 with better-than-expected earnings and revenues. However, the quarter’s earnings and revenues declined year over year. On a positive note, the company delivered strong growth across its underlying base business.
The Diabetes Care business continued to benefit from the growing sales of its flagship, sensor-based continuous glucose monitoring system, FreeStyle Libre. Last month, Abbott’s FreeStyle Libre 2 system marked the first and only continuous glucose monitoring system to receive expanded national reimbursement in France, which will now include all people with diabetes who use insulin.
Within Medical Device, the company registered double-digit organic growth in Diabetes Care, Electrophysiology, Structural Heart and Neuromodulation in the reported quarter. Abbott’s highly-productive pipeline is likely to position well for its growth in the future.
Meanwhile, a significant year-over-year decline in COVID-19 testing-related sales negatively impacted the quarter’s top line.
Zacks Rank and Other Key Picks
Abbott currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader medical space that have announced quarterly results are Penumbra (PEN - Free Report) , Zimmer Biomet (ZBH - Free Report) and McKesson (MCK - Free Report) .
Penumbra, carrying a Zacks Rank #2, reported a first-quarter 2023 adjusted EPS of 23 cents, beating the Zacks Consensus Estimate by 109.1%. Revenues of $241 million outpaced the consensus estimate by 4.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Penumbra has an estimated earnings growth rate of 64.1% for the next year. PEN’s earnings surpassed estimates in all of the trailing four quarters, the average being 109.4%.
Zimmer Biomet, carrying a Zacks Rank #2, reported a first-quarter 2023 adjusted EPS of $1.89, which beat the Zacks Consensus Estimate by 13.9%. Revenues of $1.83 billion outpaced the consensus estimate by 7.4%.
Zimmer Biomet has an earnings yield of 5.29% against the industry’s -3.20%. ZBH’s earnings surpassed estimates in all the trailing four quarters, the average being 7.4%.
McKesson reported fourth-quarter fiscal 2023 adjusted earnings of $7.19 per share, which beat the Zacks Consensus Estimate by 0.4%. Revenues of $68.91 billion surpassed the Zacks Consensus Estimate by 1.1%. It currently has a Zacks Rank #2.
McKesson has an estimated earnings growth rate of 14.3% for the next year. MCK’s earnings surpassed estimates in three of the trailing four quarters and matched the same in one, the average surprise being 4.5%.